Amid political turmoil in Malaysia, a possible collapse in the Trans-Pacific Partnership and a Trump presidency in 2017, Nicholas Bloy, founder and managing partner of South-East Asia focused Navis Capital Partners says the firm will continue to seek opportunities in the domestic market.
Q. Where do you see opportunities for growth in Asia next year?
A. We see a number of growth opportunities in Asia, though varying by geography. The rising middle class in Asia continues to drive consumption and the demand for services. Next year however will likely be a period of foreign exchange and market volatility. Hence, we see no need to rush investments right now. We are cautious about what a protectionist White House means for Asia, and China specifically. The second order effect of a US-China trade war is likely to be marginally positive for South-East Asia which houses a number of industries that would benefit from reduced Chinese presence in the US export markets. Also, intra-Asian trade flows will likely intensify as the US vacuum in the Trans-Pacific Partnership will probably be filled by China. But these second order dynamics will take a few years to play out, and 2017 is more likely a turbulent year of transition.
Q. What’s your outlook for the firm in 2017?
A. A number of exits are in progress and about to start with a pipeline of over $1 billion to be completed in 2017. Given the market position of the businesses to be sold, they are attracting significant interest from strategic buyers. Selling to strategic buyers is demanding and requires the business to be well prepared.
In 2017 we will carefully complete the final portfolio construction of Navis VII, $1.5 billion vehicle investing across South-East Asia, where we have various opportunities in the pipeline. We need to think carefully about the implications of a Trump White House and an unravelling Europe, so the final triage of opportunities is probably going to be more around domestically-oriented opportunities. We will also be driving value creation initiatives at the Navis VI, a 2009-vintage $1.2 billion vehicle, and Navis VII portfolio level, including expanding markets and completing follow-on acquisitions.
Q. Navis struck back-to-back deals and made successful exits from its investments in WorldMark and Golden Foods Siam this year, how would you describe the firm’s activities in 2016?
A. Our investment rate was extremely healthy for 2016, as we invested around $500 million in five high-quality companies and management teams, as well as making several follow-on investments, including Indonesian medical equipment company Tawada Healthcare and furniture and lifestyle brand Christian Liagre. The investments have performed well out of the gates. We continue to focus on growth initiatives across the portfolio and do not rely on bank debt to drive our investment returns. Exits, while taking longer than anticipated, were twice the volume of 2015 in dollar terms at over $800 million, and we realised above our average IRR and money multiple returns. The exits were predominantly to strategic buyers. We have now distributed to our investors more cash than we have drawn for two consecutive years.